Confused About the New Service Tax Split for Recruitment Agencies? Let's Figure It Out Together

As you are aware, effective from July 2012, the service tax payment structure has been revised, with 25% to be paid by the service provider and 75% by the service receiver (in the case of a manpower recruitment agency). Please advise me on how to calculate the service tax.

Thank you.

Service Tax Amendments Effective from July 2012

In relation to the recent amendments in Service Tax, effective from 1/7/12 (amendment attached):

75% of the Service Tax amount shall be paid by the company, and the balance 25% shall be paid by the Service Provider. This is applicable to cases where the Service Provider is a Proprietor or a Partnership firm, not applicable to Pvt. Ltd.

If the service provider of manpower service is a proprietorship/partnership concern, then 25% of the Service Tax will be levied by them in their bill, and the balance 75% of the Service Tax shall be paid by the service receiver.

Example Calculation

For example:
Manpower service for July 12 - ₹1,00,000
Service Tax @ 12.36% * 25% - ₹3,090
Total - ₹1,03,090

The service receiver shall get themselves registered with Service Tax and shall pay 12.36% * 75% of ₹100,000 = ₹9,270.

Regards,
Kennady
Consultant - Labour Laws
Chennai

Thank you for your response. I believe many vendors or clients are unaware of this topic. This information will help them understand the revisions in the Service Tax.

Regards.

Clarification on Service Tax Components

1. One clarification regarding service tax: Since I was not aware of the 25% and 75% components, I have charged the full rate of 12.35% service tax as a service provider. Now, what should be done? Should I deposit all the service tax deducted to the government?

Client Payment and Service Tax Rate

2. One more clarification is required: If my client is ready to pay the full tax of 12.36%, should I still charge 25%, or can I charge the full tax on the bill?

Service Tax Registration and Payment Timing

3. My last question is this: I registered my firm with service tax on 6th July '13; should I deposit the service tax deducted in the month of June? What about the bills on which service tax was not charged?

As far as we know, the service tax has decreased from 12.36% to 3.09%. For the sake of argument, let's presume your calculations are correct. So, out of Rs 100,000, 12.36% would be Rs 12,360, out of which 75% is to be paid by the client, which amounts to Rs 9,270, and the remaining 25% by the service provider, which equals Rs 3,090. This totals Rs 12,360 out of Rs 100,000.

However, service providers who supply security guards have a different perspective. Similar to the way the client pays the service provider's share of the PF and ESI, they also expect the client to cover 25% of the service charges. Is this correct?

I have before me a document from the Government of India, Ministry of Finance (Department of Revenue) Notification No. 30/2012-Service Tax dated New Delhi, the 20th of June 2012. So, where did you get the date as July 01, 2012? Everything seems confusing as there are 10 different descriptions of services. Why this confusion in publishing a wrong date? [Email Removed For Privacy Reasons]

Hi, I have a doubt. Do I have to collect 25% of 12.36% from the client, or do I have to pay that to the government from my pocket? Please clarify.

Subject: Current Notification for Manpower Service Security Charges

Dear Team,

I am writing to notify you about the current security charges related to manpower services. Your attention and action on this matter are required promptly.

Should you have any questions or require further clarification, please do not hesitate to reach out. Your cooperation in this regard is greatly appreciated.

Best regards,

S. Jayachandran